Kickstarting Inclusive Growth in Challenging Times

We’re navigating through one of the most complex and unpredictable geopolitical and economic landscapes in decades. With the highest number of violent conflicts since WWII, humanitarian crises are mounting, disrupting trade and energy supplies, and driving ongoing food and fuel shortages.

While some economies have surpassed gloomy forecasts, others, especially in the Global South, are grappling with post-COVID upheavals, supply chain shocks, rising capital costs, and currency volatility.

New Challenges Demand Innovative Solutions

In low-income countries, poverty rates remain higher than pre-pandemic levels. Many are heavily dependent on imports for food and energy, making them vulnerable to supply shortages and price hikes. The World Food Program estimates that 333 million people are now facing acute food insecurity—almost 200 million more than before the pandemic.

Developing nations also face soaring public debt, which rose from 19% of their GDP in 2010 to 29% in 2021. This debt burden, along with rising interest rates and exchange rate fluctuations, hampers their ability to invest in essential sectors. In the past three years alone, there have been 18 sovereign defaults, eclipsing the total of the previous two decades. Currently, 3.3 billion people live in countries where interest payments outstrip spending on education or health.

Debt issues and limited resources hinder investments in technology and innovation. The AI revolution, for instance, could boost production efficiency and drive innovation but may exacerbate inequalities due to the existing digital divide between the North and South.

Climate Challenges

The Global South has borne the brunt of climate-related economic and human costs. Without careful management, the green economy transition could impose high costs and increase inequalities in these regions.

Despite a more promising economic outlook than a year ago, IMF experts warn that historically low growth rates threaten to undo decades of progress in reducing global inequalities and extreme poverty. To avoid regression and create opportunities for future generations, we need to reignite the economic growth engine with three key priorities.

1. Redefining Growth Metrics

GDP growth is a useful but incomplete measure of economic health. It doesn’t account for living standards, environmental impacts, economic resilience, or long-term investment returns. Pursuing "growth at all costs" is shortsighted. The quality of growth matters as much, if not more, than its speed.

Short-term growth often sacrifices other crucial goals. According to recent analysis, we are only halfway to balancing growth with long-term priorities. Policymakers need new metrics that consider both growth speed and quality.

2. Revitalizing North-South Economic Collaboration

Global collaboration is essential for a new model of economic growth and development, yet geopolitical fragmentation is increasing. Protectionist measures have risen by 38% in the past year, hindering global trade and capital flows. Vital aid from wealthy nations for climate adaptation in emerging economies has also decreased when it’s needed most.

In uncertain times, countries might be tempted to adopt isolationist approaches, but history shows this is counterproductive. Long-term, win-win strategies in trade, services, ideas, technology, and talent will yield better outcomes for both advanced and developing economies.

3. Investing in the Right Foundations

In an era of technological change, green transitions, and supply chain restructuring, visionary policymakers can craft new opportunities. For some, this means becoming manufacturing hubs or integrating AI into public services. For others, it’s trading critical metals and minerals or leveraging knowledge and service industries.

However, these developments can be a double-edged sword. AI could add trillions to the global economy, but not without disruptions. The same applies to the green transition in energy, infrastructure, and consumer goods.

With 23% of all jobs expected to undergo transformations in the next five years, investing in technology and the energy transition without concurrent human capital investment is unsustainable. Leaders must implement strategic workforce planning, lifelong learning systems, gender parity and diversity initiatives, and social safety nets to ensure new growth drivers benefit everyone.

A New ‘North Star’ for Growth

Today’s economic climate demands a shift in how we think about growth. By creating a new ‘north star’ that measures both speed and quality and fostering closer economic collaboration between North and South, we can benefit everyone. This approach can reverse the trend of declining global growth since 2008 and establish an inclusive economic model that works for all.

The path forward requires us to rethink our strategies and embrace a holistic approach to growth. We must measure success not just by economic output, but by the well-being of our people, the resilience of our economies, and the sustainability of our practices. By fostering global collaboration and investing in innovative solutions, we can create a world where growth benefits everyone, regardless of geographical or economic boundaries.

What steps do you believe are essential to ensure that economic growth is inclusive and sustainable for all? Share your thoughts and insights in the comments below as I learn just as much from you as you do from me.